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Brussels Edition: Cleaning Up Won’t Be Easy

(Bloomberg) -- Welcome to the Brussels Edition, Bloomberg’s daily briefing on what matters most in the heart of the European Union.

The contagion from a widening money-laundering scandal in Europe is likely to keep rippling through regional markets and political circles today. With more banks implicated, the mess reveals the consequences of years of resistance in Europe to joint policing of its financial system. Meanwhile, this week EU ambassadors in Brussels and the European Commission will try to decide next steps for a blacklist designed to minimize money laundering from outside Europe, after governments rejected the proposal in its current form. The Commission, which devised the list that includes Saudi Arabia, is standing by it.

What’s Happening

Dead End | The push to tax the European revenue of tech giants like Google and Facebook is set to hit another dead end as EU ambassadors in Brussels discuss the latest watered-down proposal. An internal memo seen by Bloomberg indicates that disagreements between member states persist over virtually every aspect of the proposed levy.

Brexit Concessions | EU and U.K. negotiators were tight lipped after leaving talks in Brussels last night, where they were seeking to reach a compromise to try to help Prime Minister Theresa May get the Brexit deal through parliament next Tuesday. EU ambassadors will be briefed on developments today, as May’s chief whip warned she may not have the numbers to win lawmakers’ approval.

Tariff Truce | Avoiding U.S. tariffs on European cars will be a key objective for the EU’s main trade negotiator and top power broker in Washington today, as they seek to shore up a trans-Atlantic commercial truce. Trade chief Cecilia Malmstrom meets U.S. counterpart Robert Lighthizer, while European Commission Secretary-General Martin Selmayr will chat with White House economic adviser Larry Kudlow.

In Case You Missed It

German Spies | Hardliners in Chancellor Angela Merkel’s government are fighting to keep Huawei out of Germany’s fifth-generation mobile networks. Backed by intelligence officials, they’re concerned that Huawei could help China steal secrets from German companies or even the state and are pushing for strict criteria.

Feuding Italians | The future of Italy’s coalition government isn’t at stake, Prime Minister Giuseppe Conte said following a dispute between the two main populist parties over a high-speed rail project. Even if he’s right, the government still has to contend with a recession that’s casting doubt on its 2019 economic growth targets.

Polish Handouts | Elections are looming and the Polish government is seeking the favor of voters with a big package of welfare benefits and tax cuts, which have triggered sales of Polish bonds. The country’s premier sought to reassure investors that the spending spree won’t breach the EU’s deficit limit.

Thin Ice | If Hungarian Premier Viktor Orban gets kicked out of the EU’s biggest political alliance, he won’t be able to say he didn’t know why. To avoid expulsion for his anti-EU campaign, Orban must comply with three conditions set out by EU Christian Democrat Manfred Weber.

Chart of the Day

Bloomberg Economics is increasingly confident that a bottom has been reached for the euro area, with the slowdown likely to be far milder than in 2011. The latest Sentix six-month ahead economy expectations survey is encouraging and other indicators show nascent signs of stabilization, too. The European Central Bank probably won’t panic about the outlook at its meeting this week.

Today’s Agenda

French President Macron speaks at opening of European intelligence academy, one of the new EU institutions proposed in his Sorbonne speech in 2017.

German Christian Democratic Union leader Kramp-Karrenbauer speaks at traditional Ash Wednesday rally in Demmin, an event that was essentially created by Chancellor Merkel. Merkel won’t be there, for the first time since its inception.